November 9, 2015

The Potential For A Bubble Burst Is Certainly Real

The San Francisco Business Times reports from California. “It’s official: San Francisco’s luxury housing market is cooling, according to Paragon Real Estate Group. ‘The luxury home market hasn’t ‘crashed.’ There are still high-end homes selling very quickly for very high prices and competitive bidding,’ Paragon said. ‘But it has markedly cooled and the number of luxury home listings in San Francisco hit a new high in October, so correct pricing has become increasingly vital.’”

“And when it comes to ‘correct pricing,’ think lower, much lower. Paragon says it remains to be seen whether the cooling market is going to be a ‘blip … or the beginning of a longer-term reality.’”

MarketWatch on New York. “It may seem improbable, but the Manhattan condo craze could be actually slowing down, at least for a few months. CityRealty, a Manhattan-based real estate research firm that looks at home sales in the city, estimates that the median price per square foot of the top 100 condo projects in Manhattan actually fell 3% in the six months between April 1 and September 30 of this year to $2,121 a square foot. When the average is used, instead of the median, the price per-square-foot decline was even sharper year-over-year, down 8% over the same six-month period.”

“‘It looks like the very top end of the market has softened a little bit,’ said Gabby Warshawer, a research analyst with CityRealty. Still, she expected it to be a temporary lull as closing prices in mega-projects such as 432 Park Avenue haven’t become public record and might not do so until early 2016. ‘Just one of these expensive buildings can have an outsized effect on the market,’ she said.”

Boise State Public Radio in Idaho. “One of the emerging issues in the Treasure Valley over the last few years is the shrinking number of affordable housing units. As the housing market has improved and people continue to move to the area, rents have gone up and the number of available units has also declined. I talked with Nicolas Davidson, an asset manager with Kennedy Wilson Multifamily Management Group, which owns rentals in several western states. The company recently bought a big complex on Main and Whitewater, its first investment in Boise.”

“‘It’s a really interesting market. It’s an up and coming market. There’s a lot of job growth and migration. I think Boise is starting to be more well-known,’ Davidson says. The company is now remodeling apartments and will raise rents as a result.”

The Greeley Tribune in Colorado. “Within the next two years, more than 560 new multifamily housing units are expected to be available in Greeley. By comparison, there are 357 single-family lots under construction in town. Some are worried Greeley won’t be able to sustain a healthy housing market with the influx of so many apartments and townhomes. Others are more optimistic.”

“The addition of 560 new units over the next two years is substantial. And with the downturn of the oil and gas industry barreling toward its second year, Greeley’s economy will soon start to feel the squeeze. So the potential for a real estate bubble burst is certainly real. With so many moving parts to the issue it’s certainly difficult to predict what the future will bring. That said, we’re excited about the prospect of relaxing the market here in town and hopefully bringing prices back down to the point of affordability. As long as they don’t drop too far.”

The Star Tribune in Minnesota. “In the years leading up to the Great Recession, B.J. Gugat shared the same belief as many Americans: The equity in her house was safe. That’s why a decade ago she invested a $100,000 windfall from a home sale into a bigger house she built in Farmington, only to watch that equity evaporate when the housing market crashed a couple of years later. Today, with her daughter about to go off to college, Gugat’s expenses are rising faster than her income. It’s a stretch to pay the mortgage every month, so she’s ready to sell.”

“Trouble is, although the value of her house has increased and it’s now worth more than her mortgage, she still doesn’t have enough equity to cover the cost of downsizing to a less-expensive house. ‘I’m stuck between a rock and hard place,’ she said.”

“By nearly every indication, the housing market in the Twin Cities now is humming along and, in some parts of the metro area, prices are breaking records. But one-third of all Twin Cites-area homeowners are effectively underwater on their mortgage, meaning they have enough equity to cover their mortgage, but not enough to sell their house and move to a different one. That’s why so many would-be sellers are staying put.”

“In 2006, Michele Whaylen and her husband paid $452,900 for an award-winning Parade of Homes model house in New Prague. Because of a job relocation, they were forced to move. They listed the house in late July for $379,900, a full $73,000 less than they paid for it. Since then, they’ve had only one showing. Whaylen blames the situation on the availability of inexpensive lots new in the area. This summer alone, two houses have been built on their cul-de-sac.”

“Because they haven’t been able to draw any equity and aren’t sure it will be possible, they bought a house in Iowa using a VA loan with low down-payment requirements. And to save enough for their 5-percent down payment, Whaylen has picked up several part-time jobs to supplement the income from her full-time job. ‘I am not sure what we will do for the long term,’ she said. ‘I realize we are in a much better position than most, but the stress is off the chain.’”

Bits Bucket for November 9, 2015

Post off-topic ideas, links, and Craigslist finds here. Please visit my Youtube channel which you can also find here: